Elder law estate planning

BANKRUPTCY AND MEDICARE – A FRAUDULENT TRANSFER IS A FRAUDULENT TRANSFER

Published on: January 16, 2016 | by Ettinger Law Firm

The Eastern District of Virginia Bankruptcy Court issued an opinion on a case with a unique factual scenario almost three years ago, on February 6, 2013 in the case of In Re Woodworth, (Bankr. E.D. Va., No. 11-11051-BFK, Feb. 6, 2013). The case is important because it speaks to the larger issue of fraudulent intent and how even when a trust settlor relies on a seemingly befitting and authoritative disclaimer against fraudulent conveyances, a Court can still find fraud. It also speaks to the vital need to consult with competent counsel for all major financial decisions, to insure that those decisions do not impact eligibility for medicaid or other government programs.

The case centered on a woman’s attempt, and seeming initial success, at what the Court characterized as medicaid fraud. The case involved the debtor, Holly Woodworth and her mother, Dorothy Lee Stutesman. Assuming that the facts of the opinion are accurate, it seems that Ms. Stutesman was rather poor in her money management skills. Ms. Stutesman first entrusted her husband to manage her finances and then her daughter, Ms. Woodworth, after her husband passed away. Most specifically, she first invested a very large sum of money, at least $143,000, with Merrill Lynch, although she used Ms. Woodworth’s social security number to open and listed her as the account owner. Both Ms. Woodworth and Ms. Stutesman both testified under oath that this arrangement was to protect the money from those who would prey on Ms. Stutesman’s lack of financial ability. Most importantly, Ms. Stutesman added that in addition to her desire to protect the money from potential scammers, she did not want assets in her name, in order to be eligible for Medicaid and other public benefits, if and when she should need them. In 2010, after the hit to the stock market, the parties created a trust.

The Bankruptcy Court found the language of the engagement letter that came along with the creation of the trust noteworthy and for good reason. Most specifically, the engagement letter stated that the trust “avoids creditors claims of fraudulent conveyance and civil conspiracy to divest yourself of valuable assets, and avoids IRS trigger for a taxable transaction.” Id. At 3. Both parties recognized that the money in the Merrill Lynch account and then trust was Ms. Stutesman’s. Ms. Woodworth filed bankruptcy due to events and factors unrelated to the trust, although she claimed that she only held title to the funds in the trust but no equitable interest.

ABLE ACCOUNT LAW CHANGES BROADENING PROTECTIONS FOR SPECIAL NEEDS PLANNING

Published on: January 12, 2016 | by Ettinger Law Firm

On December 19, 2014 President Obama signed into law a number of tax and financial measures to extend certain tax benefits. More specifically, the legislation enacted the Achieving a Better Life Experience (ABLE) Act of 2013, which amends section 529(e) of the United States Tax Code, to allow for tax-free savings accounts for individuals with disabilities. Almost a year later, almost to the day, both the Federal government and New York state both acted to expand the coverage under the ABLE Act. Prior to the most recent change, ABLE accounts had to be located in the same jurisdiction as the beneficiary.

The law also required state laws enabling such savings accounts. If the state did not have such enabling legislation, individuals in that state would not be able to set up such an account. On December 18, 2015, New York Governor Andrew Cuomo signed the New York Achieving a Better Life Experience (NY ABLE) Act allowing for such savings accounts in New York. On the same day that Governor Cuomo signed the NY ABLE Act, President Obama signed another spending bill that contained, among other things, legislative changes to the ABLE Act. More specifically, sections 302 and 303 of the bill allows for changes in what purchases or expenditures are permitted under the ABLE Act and allowed for beneficiaries to have such accounts in jurisdictions different than the one that they live in.

While one might reasonably believe that the NY ABLE Act is now not necessary, it still has much value as it allows for such accounts to exist within the state and thus subject to the various protections afforded under New York law. It would also draw in capital from other jurisdictions that do not have ABLE Act enabling legislation. All of these measures are part of an expansion of the laws that allow for the financial protections for financial and estate planning for those with special needs. Previous to the PATH Act, individuals with special needs who had savings accounts or other assets over a certain amount (generally, $2,000) would possibly be disqualified from certain governmental benefits. Savings in a PATH Act account will not jeopardize these benefits or eligibility for benefits.

DIFFERENCES BETWEEN ABLE ACT ACCOUNTS AND SPECIAL NEEDS TRUSTS

Published on: January 8, 2016 | by Ettinger Law Firm

WHAT IS BEST FIT

Both an ABLE Act account and a special needs trusts try to accomplish essentially the same thing. Both attempt to ensure that a special needs child or person are financially planned for through various legal and financial means so as to enrich the life of the beneficiary. An ABLE Act account as well as a special needs trust also aim to protect the beneficiaries valuable governmental benefits that utilize a means based testing for eligibility purposes. While both products roughly accomplish the same thing, one may be better at accomplishing one thing rather than the other.

TWO DIFFERENT MEANS TO ONE END

CHARITABLE ROLLOVER OF RETIREMENT ACCOUNT DISTRIBUTION NON-TAXABLE DISTRIBUTION FROM IRA

Published on: January 5, 2016 | by Ettinger Law Firm

On December 18, 2015 President Obama signed the Protecting Americans from Tax Hike (PATH) Act, which made permanent, among other things, three rather popular charitable tax incentives were set to expire January 1, 2016. The most important provision of the PATH Act for estate planning purposes is the continued allowance of rollover of individual retirement account distribution. This particular measure came into law in 2006 as part of the Pension Protection Act as a temporary measure. It expired and brought back to life several times over in the last nine years. The measure has shown itself to be a wildly popular measure, with approximately $140 million in charitable donations in the first two years and hundreds of millions going to colleges and universities in the last nine years. It seems likely that with the permanence of the new law, charitable givings will likely increase.

REQUIREMENTS OF CHARITABLE ROLLOVER

There are some important rules that are necessary to satisfy in order to qualify for the tax deduction benefits. They are:

HOW LONG CAN IRS COME AFTER ME? THE SUMNER REDSTONE CASE

Published on: January 2, 2016 | by Ettinger Law Firm

Sumner Redstone is an entertainment business mogul with a majority share ownership of CBS entertainment and Viacom, and through Viacom, BET and Paramount Pictures, all through his majority ownership of his family business, National Amusement, which originally started out in the drive in movie theater business during The Great Depression. In just the last few weeks a case against Mr. Redstone by the IRS presents an oddity in the law, which may make many people shutter. More particularly, the IRS issued a Notice of Deficiency for a taxable event from 1972 – over 40 years later.

The nature of the case revolved around a transfer of shares in National Amusement Corporation in 1972 to separate trusts set up for the grandchildren of the founder, Sumner Redstone’s father Michael Redstone. Sumner set up one trust for his kids while his siblings set up separate trusts for their kids. At the time the transfer of interfamily stock was of a insignificant amount that passing them from personal ownership to a trust did not even require a tax return. One can and should ask about the concept of a statute of limitation.

Apparently, as the case against Mr. Redstone shows, the IRS does not have a statute of limitation for unfiled tax returns. 26 U.S.C. § 6501(c)(1) establishes that when a taxpayer files a fraudulent tax return, (c)(2) otherwise attempts to avoid tax liability, or (c)(3) fails to file a tax return, there is no statute of limitation. Mr. Redstone has an impressive educational pedigree, where he graduated from first in his class from the Boston Latin School and then graduated Harvard in only three years in 1944, which was actually common at the time. After graduation he served as an officer in the United States Army, helping to decode Japanese messages. He attended Georgetown Law School after the war and then received his LL.B. in 1947 from Harvard Law. After working for various governmental departments followed by private practice, Mr. Redstone went to work for the family business, which was booming by then.

PROTECTING YOUR FUTURE VIA POOLED TRUST ASSET ALLOCATION

Published on: December 26, 2015 | by Ettinger Law Firm

COMMON LEGAL WAY TO PROTECT EXCESS INCOME

Unfortunately many means based programs, such as Medicaid, are strict in their qualifying criteria. Depending on the specific facts you may not qualify for Medicaid and even as little as twenty dollars a month can make a difference. There is no sliding scale of benefits based on your income. Each state has its own financial thresholds for income qualification, given the drastic difference in cost of living throughout the country. New York only allows for up to $845 in income, anything above that will disqualify the potential recipient. So what of the millions of men and women throughout New York that live on modest means and yet still receive more than $845 in monthly income? For example, a person in Manhattan or even Long Island who earns approximately $2,000 per month does not live luxuriantly, yet he/she may need certain services and does not want or even need to go into a nursing home facility for those services.

Pooled trusts allow for seniors to setup their own trusts so that they can still live a respectable and modest life and not be required to turn over all of their income to the state for Medicaid eligibility. In the case of the senior above, he/she would $1,155 ($2,000 – $845) to a pooled trust that they joined so that he/she could still qualify for Medicaid and have money left to pay bills and perhaps enjoy their normal lifestyle with family and friends without much financial impact.

DONATE MY BODY TO SCIENCE

Published on: October 29, 2015 | by Ettinger Law Firm

Donating an organ or even a whole body for scientific study or medical education is a relatively common event, which permits a person with perhaps a rare or not well understood disease to contribute to medical science. Even if the person passes without a disease or any unique characteristics, medical schools need these volunteers for very important work. Some people see their act as an act of charity, a way of giving a gift to society. Organ donation helps to reach even more people by providing spare parts for surgeons, for those who need a replacement organ or tissue. It has been estimated that 114,000 Americans are awaiting organ transplants and that one person is added to the list every 11 minutes and that each year 6,600 people die each year while on the organ transplant list.

ANATOMICAL GIFTS PERMITTED VIA WILL

In 2005, the New York legislature passed a law which made it easier to give an anatomical gift. Organ donation is easy enough now, as it can be a mere check the box designation on your driver’s license. No additional signatures or witnesses are needed. New York further permits a person to validly donate their organs or their whole body by way of will. If the will is later invalidated, the donation is considered valid and any physician or medical school acting on the gift is shielded from liability. Some people with religious or moral objections to donating their body may still decide to donate organs without violating their conscience or religion. Even with these provisions in place, it is still best to discuss these decisions with your family and loved ones.

Who will Manage Your Affairs in the Event You are Incapacitated?

Published on: October 1, 2015 | by Ettinger Law Firm

No one likes to consider the fact that they may one day need help in managing their affairs, but the fact remains many people will need a fiduciary they can trust to act on their behalf when incapacitated. Typically as part of an estate plan, an individual will execute a power of attorney appointing one or more individuals of their choice to manage their health care decisions and financial matters in the event they can no longer handle their own affairs. Powers of attorney can vary in scope and purposes, and can serve as one method to avoid judicial intervention, including guardianship or conservatorship proceedings.

Guardianship Proceedings

When a health care or financial power of attorney are not sufficient or absent from an estate plan, a guardianship or conservatorship proceeding may be necessary to appoint someone to represent the person suffering an incapacity. In New York, a proceeding for guardianship can be commenced by a variety of parties, including, a distributee of the incapacitated person’s estate, certain fiduciaries, an interested party concerned with the welfare of the individual, or the incapacitated person himself. Incapacity is determined by clear and convincing evidence that the individual is unable to manage their own affairs and is unable to understand the consequences surrounding their inability in such a way that will likely cause harm to themself or others.Courts will consider a variety of factors when selecting a guardian, including the incapacitated person’s specific needs and the capabilities of the proposed guardian in meeting those needs.

The Mickey Rooney Example: Be Clear About Funeral & Burial Plans

Published on: April 16, 2014 | by Ettinger Law Firm

Legendary actor Mickey Rooney died earlier this month at the age of 93. Over the later course of his life, Rooney offered many important lessons related to elder law estate planning. For one thing, he was a vocal advocate against senior financial exploitation. In 2011 he testified before a U.S. Senate committee that was analyzing the various aspects of elder abuse. Rooney told the committee that he was emotionally and financially abused at the hand of his step-children (the biological children of his estranged wife).

At that hearing, Rooney echoed the thoughts of many New York seniors who were in the same situation, explaining, “For years I suffered silently. I didn’t want to tell anybody […] Even when I tried to speak up, I was told to shut up and be quiet.”

Fighting Continued After Death

Senior Forced to Spend $100,000 to Prove Competence

Published on: May 21, 2013 | by Ettinger Law Firm

The Austin American Statesman reported on a troubling elder competence case that is leading many to call for legal reforms. The story is a reminder of the heartache that may arise when feuding arises within families and relatives engage in costly legal battles.

The 91-year old’s struggles began when two adult daughters told a local judge that they believed their mother was not mentally sound. They worried that she was being financially exploited and was unable to care for her own health. While perhaps rooted in good intentions, the process is an example of how senior guardianships proceedings can go awry when not done carefully.

The senior in this case lived alone until 2009. That year she broke her leg and was required to move into a senior living community. The woman was happy at the facility, and eventually one of her three daughters began helping managing her financial affairs.